A Retailer Whose Greatest Asset Is Adaptability

The early drama of retailer Fresh & Easy was a strange two-act performance. Act One began more than a year before the small-format's November 2007 launch in the Western U.S. At that time worried retailers were closely tracking every report about Fresh & Easy's plans because they knew the parent company, Tesco of the United Kingdom, had deep pockets and a formidable record.

Act Two began shortly before Fresh & Easy unveiled its first stores — in California, Arizona and Nevada. By that time the fear had clearly dissipated.

Here's how I put it in a column in September of 2007:

“It's close to the moment of truth in the American Southwest. … The battle is about to rage. Except that few retailers seem truly concerned.”

What happened? Retailers looked at Fresh & Easy's business model and determined the company would be “a rival that impacts everyone but mortally wounds no one,” as I wrote in that column.

The industry's assessment was on target, and still is. Fresh & Easy quickly ran into challenges from a souring economy and misunderstanding of the needs of American consumers. Expansion plans were slowed. Today the operator has 159 stores, which is considerably fewer than initially expected by this time. Supermarkets have largely been unscathed, and don't expect to be seriously challenged anytime soon.

That doesn't mean the curtain has gone down on Fresh & Easy. Expect more acts to follow because of underlying factors that will probably make the operator more formidable. The first is Tesco's deep commitment to growing the brand, reaffirmed during the recession. This year expansion plans call for about one new store a week. The second factor, which is even more important, is an ongoing dedication to adapting the model until it's on target for U.S. consumers.

That means a willingness to revamp everything from assortments to store layouts. One of the chain's biggest successes was growing its appeal to Hispanics after reports that the first stores fell short of the mark.

The company's recent moves are outlined in a story in this issue. They include increasing product offerings by more than 1,000 items, unveiling a series of advertising campaigns, and introducing a group of healthy, ready-to-eat prepared meals and sides.

The next decisions will be even more important. Will Fresh & Easy's appeal to inner cities bring it to major markets such as New York and Chicago? Will it ratchet up the level of advertising and promotions? Will it create a larger prototype to grow sales?

Don't count on these questions being answered right away, but given this retailer's willingness to adapt to market needs, these kinds of issues will be addressed. Fresh & Easy is betting that reworking the script enough times will produce a winning performance. It may be right.